Texas Instruments Sees Strong Demand; Shares Dip on Supply

(Bloomberg) -- Texas Instruments Inc. gave a bullish forecast for the current quarter, signaling that demand is rebounding for semiconductors for vehicles, personal electronics and industrial use.

The stock slipped on concern customers are ordering more chips now to head off a potential supply shortage.Sales will be $3.79 billion to $4.11 billion and profit is expected to be $1.44 to $1.66 a share in the period ending in March, the company said Tuesday in a statement. On average, analysts estimated profit of $1.33 a share and sales of $3.58 billion, according to data compiled by Bloomberg.

Texas Instruments gets the biggest chunk of its sales from manufacturers of industrial equipment, making its earnings and forecasts a bellwether for the broader economy. It also produces semiconductors that go into everything from vehicles to home electronics and space hardware.

“We had a strong quarter driven by strong demand in automotive, industrial and personal electronics,” Chief Financial Officer Rafael Lizardi said in an interview.

Company management faced repeated questions on a conference call about the speed of the rebound in demand and whether Texas Instruments and its peers have sufficient supply. Some carmakers have slowed production, saying they don’t have enough chips because of high demand during the pandemic for semiconductors used in consumer products such as game consoles, smartphones and laptop computers. Analysts on the Texas Instruments call worried that the company’s orders are artificially high due to customers buying more components now to avoid supply shortages later.

The company has its own manufacturing, providing about 80% of its needs, which puts it in a much stronger position than competitors who outsource more, Lizardi said. While there are “hot spots” of demand related to supply issues, he said Texas Instruments is confident it has enough inventory and production in place to meet its financial targets. Long-term growth in the amount of electronics being added to cars and machinery will power those markets past any short-term fluctuations, Lizardi said.

In the near term, growth in the company’s automotive business in particular is even outrunning strong demand for vehicles, meaning there likely will be a slowdown of orders around the middle of the year, according to Stifel Nicolaus & Co. analyst Tore Svanberg.

Shares declined about 2% in extended trading on the supply concerns after closing at $171.47 in New York. The stock gained 28% in 2020, and is up 4.5% this year. The shares have trailed the performance of the broader Philadelphia Stock Exchange Semiconductor Index in both periods.

In the fourth quarter, net income rose to $1.69 billion, or $1.80 per share, from $1.07 billion, or $1.12, a year earlier, the Dallas-based company said. Revenue was $4.08 billion, compared with an average analyst estimate of $3.58 billion.

(Updates with comments from CFO in the fifth paragraph.)

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